Hot money sustains net outflow

Foreign portfolio investments continued to post a net outflow in September but the amounts involved were down from earlier in the year, central bank data released on Thursday showed.

Last month’s net outflow of $323.98 million was lower compared to August’s $543 million and the $569 million recorded in May. It was the seventh consecutive month that investors took out more money than they put into the Philippines.

The Bangko Sentral ng Pilipinas said total outflows rose to $1.69 billion from $1.66 billion a month earlier, while total inflows increased to $1.37 billion from $1.12 billion.

It said the month-on-month increase in the total foreign portfolio investment outflow was due to “profit-taking and continued concerns on the slowdown of the Chinese economy and its impact on the global market.”

Year-to-date outflow
Cumulative year-to-date transactions yielded a net outflow of $414 million, narrowing from the $854-million net outflow seen in the comparable period last year.

Total outflows of $16.5 billion offset total inflows of $16.08 billion, the BSP reported.

The central bank said about 81 percent of inbound investments flowed into listed stocks on the Philippine Stock Exchange such as holding firms; banks; property companies; food, beverage and tobacco; and telecommunication firms.

The rest of the so-called hot money went into peso government securities (19 percent).

The United Kingdom, United States, Singapore, Belgium, and Hong Kong were the top five investor countries for the month with a combined share of 81.5 percent. The US remained the main destination of outflows, receiving 84.1 percent of the total.

Called hot money because of the ease with which these enter and leave the country, the funds are invested in Philippine financial assets and do not necessarily create jobs, unlike foreign direct investments that are put into in assets such as factories and equipment.

The central bank expects portfolio investments to register a net inflow of $1.4 billion this year, reversing a $310.21-million net outflow recorded in 2014.